Buy in Long term
Stocks which have entered the 'Buy Zone' for long term in last two days.
Finding the right stocks for the long term is the most important objective of share market investors in any world region. The reason for the popularity of long-term stocks among investors can be attributed to robust wealth creation and portfolio-building capabilities. Let us understand some important aspects of long-term stocks:
What are Long-Term Stocks?
Long-term stocks refer to shares with strong fundamentals and high growth potential. These stocks provide returns over a long-term investment horizon through constant compounding and help investors build robust portfolios.
Long-term stocks represent companies that are backed by strong fundamental attributes such as solid profitability, positive cashflows, and robust balance sheets. Investors identify these stocks through deep analysis and research of stocks.
Investors buy long-term stocks to hold them for an extended investment period, ranging from at least 1 year to more than 5 years. Renowned investor Warren Buffet is one of the primary examples of a person who made billions of dollars by investing in long-term stocks.
- Stocks that are backed by strong fundamentals and are suited for investing with a long-term investment horizon are called long-term stocks.
- Investors choose these stocks for investing to generate substantial returns in the long term.
How To Identify Long-Term Stocks?
- Management Analysis - Performing management analysis is important to understand the strengths and weaknesses of a company’s leadership. With strong management, which works towards the growth and expansion of business, companies tend to perform well in the long term.
- Fundamental Analysis - The analysis of fundamentals like profitability, cash flow position and balance sheet are core metrics for identifying long-term stocks. These fundamentals help investors gauge a company’s financial health and estimate future growth opportunities and profitability.
- Market Competition - Every company operating towards expanding its customer base and revenue streams faces a certain level of competition from other companies. Thus, investors must ensure that the underlying companies of targeted long-term stocks have a competitive edge in their respective industries.
- Industry Trend - Analysis of Industry trends can help you to identify booming industries and long-term stocks which are poised for solid future growth. The EV sector and renewable energy sector are highly preferred by investors for long-term investing.
Benefits of Investing In Long-Term Stocks
- Robust Portfolio Building - Long-term stocks are very helpful in creating a solid portfolio, and due to strong financials, these stocks provide strength to portfolios in the long term.
- Stability - Stocks for the long term are highly preferred because they maintain price stability during market fluctuations without losing substantial amounts of gains.
- Wealth creation - The wealth creation benefit of long-term stocks can be attributed to their constant price appreciation and compounding returns.
- Reduced Taxation - Investing in long-term stocks can be beneficial because this investment attracts less tax than short-term trading. These stocks attract Long Term Capital Gains Tax (LTCG) at 12.5%.
Key Takeaways On Long-Term Stocks
- Stocks that possess qualities of wealth creation and offer compounding returns over an extended period are called long-term stocks.
- These stocks have strong fundamentals, such as a good cash flow, positive profitability and substantial growth potential.
- To identify long-term stocks can be identified through management and fundamental analysis.
- Long-term stocks offer superior benefits like compounding returns, stability and solid portfolio building.
FAQs
Are penny stocks good for the long term?
Yes, penny stocks can be a good investment option for the long term. However, it is important to note that penny stocks are not based on strong fundamentals and carry huge downside risks. Therefore, investors must make sure that they have done in-depth research and analysis before investing in these stocks.
Which are the best long-term stocks in India?
The best long-term stocks in India to buy for the upcoming period are:
- Mahindra and Mahindra Limited
- Gujrat Fluorochemicals Limited
- Mankind Pharma Limited
- Safari Industries (India) Limited
- Edelweiss Financial Services Limited
Will I face losses in long-term stock investment?
Yes, it is possible that some long-term stocks can become loss-making investments due to factors like market volatility, weak financial performance or regulatory factors. When investing in long-term stocks, you must note that these stocks are exposed to the mentioned factors for prolonged periods, which can sometimes lead to losses. Therefore, you must do robust research before investing in long-term stocks, or you can seek stock market advisory from SEBI-registered research analysts or investment advisors.
For how long should I Invest in long-term stocks?
There is no fixed time for which you must hold a stock, but preferably, to earn good returns from long-term stocks, you must hold them for at least 1 to 2 years. Since these stocks provide compounding returns, therefore holding them for extended periods can be a good strategy.
Can a beginner invest in long-term stocks?
Yes, beginners can invest in long-term stocks because it can be the right strategy to start your investment journey while taking a limited amount of risk.